ExpertMedium1 markMultiple Choice
CPA · Question 43 · Area III: State & Local Governments
A local government issues $5,000,000 in general obligation bonds to finance the construction of a new police station. In the Governmental Funds financial statements (Capital Projects Fund), how is the receipt of the bond proceeds reported?
A local government issues $5,000,000 in general obligation bonds to finance the construction of a new police station. In the Governmental Funds financial statements (Capital Projects Fund), how is the receipt of the bond proceeds reported?
Answer options:
A.
Revenue
B.
Other Financing Source
C.
Long-term Liability
D.
Deferred Inflow of Resources
How to approach this question
Governmental Funds = Current Financial Resources Focus. Long-term debt is not a liability. Proceeds are an inflow. Classify as 'Other Financing Source'.
Full Answer
B.Other Financing Source✓ Correct
In governmental funds (modified accrual), long-term debt is not recognized as a liability. The proceeds from issuing the debt are reported as an 'Other Financing Source' on the Statement of Revenues, Expenditures, and Changes in Fund Balances.
Common mistakes
Recording as Liability (that's Gov-wide); Recording as Revenue.
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